Mothernode’s Job Costing function recognizes Purchase Order actual costs after the purchase order items are marked as received in Mothernode. This is the standard accounting practice in most job costing and ERP systems.
Why costs are recognized at PO item receipt rather than when the PO is created
A Purchase Order is simply an authorization or commitment to purchase. It does not represent an asset or an expense yet because:
- The vendor hasn’t necessarily shipped the material.
- Your company doesn’t yet control the goods.
- The actual quantity received may differ from what was ordered.
- Prices, freight, or other costs may change before receipt.
The receipt is the event that transfers ownership of the materials into inventory or directly onto the job.
Why this is considered best practice
Recognizing cost at receipt provides:
- Accurate WIP reporting
- Accurate inventory valuation
- Protection against overstating job costs when materials haven’t arrived
- Better matching of costs to the period in which they become available for use
For example:
- PO issued: $12,000 of aluminum extrusions
- Vendor ships only $9,500 this week
- Remaining $2,500 ships next month
If costs were recognized when the PO was issued, the job would immediately show $12,000 of material cost even though only $9,500 is actually available. Recognizing cost upon receipt keeps the job costing aligned with reality.
In the Signage industry
This approach is particularly common because jobs often involve:
- Aluminum
- Acrylic
- Vinyl
- LEDs
- Fabrication components
- Outsourced manufacturing
Materials are frequently delivered in stages. Recognizing costs only for what has actually been received prevents partially delivered jobs from appearing over-costed.
